The UK Treasury has been urged to provide clarity on changes to a car tax loophole affecting drivers of petrol, diesel, and electric vehicles. The alteration, announced by Chancellor Rachel Reeves in the Autumn Statement, aims to close ‘contrived’ car ownership schemes and is expected to generate an additional £865 million in tax revenue over the first four years.
The Employee Car Ownership Schemes (ECOS) loophole is set to be closed from April 6, 2026. According to the Treasury, this change could bring in £275 million in tax in 2026-27, followed by £220 million in 2027-28, £195 million in 2028-29, and £175 million in 2029-30.
Experts have criticized the government for not providing sufficient details ahead of the rollout. Alison Ashley, partner and head of motor retail at RSM UK, expressed concern that the industry is still awaiting crucial updates to prepare for the change. ‘There are key questions which remain unanswered six months on from the Government’s ECOS announcement, with under a year until the new legislation coming into place,’ she said.
The latest update from HM Revenue and Customs (HMRC) addressed references to electric bikes and electrically assisted pedal cycles (EAPCs), clarifying that from 2011-2012 onwards, cycles are charged 20 pence for all business miles ridden. Statutory mileage rates are used to determine the approved amount of mileage allowance payments that can be paid tax-free under Approved Mileage Allowance Payments (AMAPs) rules.
Ashley emphasized the need for HMRC and the Government to provide clarity while consulting with the automotive industry on the proposed legislation’s drafting. ‘These figures seem to be predicated on employees remaining in the cars they typically have now under ECOS when these are taxed as company cars,’ she added.
Key Tax Rates
- Cars or vans: 45p for the first 10,000 miles, then 25p per mile
- Motorcycles: 24p per mile
- Electric bikes: 20p for all business miles ridden
The industry awaits further clarification on how these changes will be implemented and their full implications for drivers and businesses.
